Process of Converting Section 8 Company into Other form of Companies

Section 8 Company

Process of Converting Section 8 Company into Other form of Companies

Registrationwala

A section 8 Company can be converted into the private limited company, public company and other forms of companies. However, a section 8 company cannot be converted into a one person company.

Section 8 company is registered for the non- profit purposes or the charitable purposes only. The main objectives of Section 8 Company are promoting research, social welfare, religion, charity, commerce, art, science, sports, education, and the protection of the environment. One thing to be noted about section 8 Company is that any profits and income arising shall be applied for promoting only the objects of the company. Further, no dividend is paid to its members. Section 8 Company is empowered to convert itself into the companies of any other kind after following the prescribed conditions under the rule 21 and rule 22.

 

Conversion Process

Following steps must be followed in order to convert section 8 Company into any form of company-​​​​

1.    Obtaining the consent of the members- An approval of members of the company shall be taken by the way of special resolution passed at the general meeting. The explanatory statement containing the reasons for such conversions shall be attached to the notice of the general meeting. Further, a certified copy of the special resolution along with a copy of the Notice and the explanatory statement shall be filed with the Registrar in Form No. MGT- 14.

2.    Obtaining NOC from other authorities- If a company has obtained any special privilege, benefit or grant(s) from any government authority or a recognized body then it shall give them notice in writing and proof of service along with the application for conversion. By filing the notice a No Objection Certificate must be obtained and filed with the Regional Director, along with the application.

3.    Filing an application with the regional director- The sections 8 company shall make an application in FORM NO-18 to the regional director along with the copy to ROC for converting itself into other forms of companies.

It is mandatory for the section8 company to file all its financial statement and Annual Returns of the financial year before submitting the application to the Regional Director. In case the application is filed after the expiration of 3 months from the financial year to which the financial statement has been filed, a statement of the financial position duly certified by chartered accountant made up to a date not preceding thirty days of filing the application shall also be attached.

4.    Declaration by the board of directors- A declaration shall be given by the Board of directors asserting that no part of income or property of the section 8 company is transferred directly or indirectly by way of dividend or bonus or otherwise to the members of the company.

5.    Certificate from professionals- A certificate certifying that the company has complied with the conditions laid down for conversion has been prescribed with from a practicing Chartered Accountant/ Company Secretary in practice/ Cost Accountant shall be filed by the company.

6.    Publishing a notice in the newspaper- The section 8 company shall publish a notice in Form INC 19 within a week from the date of making the application to the Registrar of Companies. The notice shall be published in vernacular language and one English language newspaper. Further, the copy of such notice in newspapers shall be submitted to the Regional Director immediately after their publication.

7.    Sending the notice to authorities- A copy of the notice, application and all attachments shall be sent to the below-mentioned authorities through registered post or hand delivery to:

o    The Chief Commissioner of Income Tax having jurisdiction over the company,

o    Income Tax Officer who has jurisdiction over the company,

o    The Charity Commissioner,

o    The Chief Secretary of the State in which the registered office of the company is situated,

o    Any organization or department of the Central Government or State Government or other authority under whose jurisdiction the company has been operating. 

These authorities shall make representations, if any, to the Regional Director within sixty days of the receipt of the notice.

8.    Approval or rejection by the regional director- In order to take this decision the regional director may require the applicant to file approval of any particular authority and he may also obtain the report from the Registrar. After being satisfied the regional director may issue an order approving the conversion of the company into a company of any other kind. The regional director may impose any conditions as he deems fit. Following are some of the conditions that may be applied-  

1.    The company is required to give up all claims of special status, exemptions, and privileges after the conversion.

2.    To make compensations for the difference in prices of the immovable property to the buyer.

3.    Within 30 days of receiving the approval, the company is required to set off the accumulated profits or unutilized income brought forwarded from the previous years and transfer the balance to IEPF account.

Before imposing the conditions or rejecting the application, the company shall be given a reasonable opportunity of being heard by the Regional Director.

9.     Post Conversion requirements-If the conversion is approved by the regional director the company shall pass a special resolution for amending its memorandum of association and articles of association consequent to the conversion of the section 8 company into a company of any other kind.

10. Obtaining the fresh certificate of Incorporation-The Section 8 company is required to file the certified copy of the approval of regional director in Form INC 20 within 30 days of receipt. The approval shall be filed along with the Amended memorandum of association and articles of association of the company and a declaration by the directors that the conditions if any imposed by the Regional Director have been fully complied with. Further after receiving all the documents the Registrar of Companies shall register the documents and issue a fresh Certificate of Incorporation.

Also read:  Common Mistakes to avoid when registering a Company in Dubai

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